Author: Michael Covel

Had to send you an email after seeing the Alison Gopnik interview pop up this morning. You’re outdoing yourself with the diversity of these guests, and I can’t thank you enough for the people you’ve directed me towards (I owe you Annie Duke and the Play Bigger guys particularly). I’m already familiar with Gopnik, but seeing the name was a reminder of how in, out, and around the finance box these guests are. You are literally an idea gold mine. Thank you.

My name is [Name]. I’m a frequent listener of your podcast and I was wondering if you could give me a piece of advice.

I’m 20 years old and I just moved to London, I have no former experience in finance or the markets but for the past two years I decided that I wanted to be a trader and have started to read many books about the markets and finance (including yours, except trend following which I haven’t read yet).

I haven’t got a college degree, and my question is: Should I go to college and get an economics degree or should I try to get a job at an hedge fund?

I don’t know anybody that works in the industry so I would need to go “knock on doors” and ask for one and because I’m not formally qualified I am more than willing to work for free for whatever time necessary, serving coffee or whatever is needed.

The other option is to go to college but I have seen interviews with great traders like Stanley Druckenmiller and Paul Tudor Jones, who went to college in the University of Virginia but it seems that his real market education was with Eli Tullis who he did serve coffee for like he said in the documentary trader where he basically called the 1987 crash. Jones also said in a interview, which I quote; “While I’m a staunch advocate of higher education, there is no training — classroom or otherwise — that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. There’s typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it — a sort of baptism by fire. One has to experience both the elation and fear as markets move five and six standard deviations from conventional definitions of value”.

And economists like Peter Schiff who basically says that college are a waste of time and money and gives pretty good arguments and shows good evidence of why that is…

Since you are a very successful entrepreneur and have interviewed great traders, fund managers and award winning economist over the years and have written several books about the markets: Is it a ridiculous idea to ask if you could give me your advice to what path should you think I should follow?

Thank you very much for your books and podcast! Thank you for taking the time to read this email!

Alison Gopnik is an American professor of psychology and affiliate professor of philosophy at the University of California, Berkeley. She is known for her work in the areas of cognitive and language development, specializing in the effect of language on thought, the development of a theory of mind, and causal learning. Her primary study is looking at how we learn and grow from the earliest years of our lives.

How did Alison get started down this path? She is the eldest of 6 children brought up in a bohemian style family. Being the oldest of 6 she had a deep understanding of children at a young age. She saw relationships between play and learning in babies first hand and was intrigued early on.

Alison also looks at the relationship between how long a baby is a baby before adulthood and how that relates to the rest of their life that follows. Humans generally have twice the amount of childhood than any of our animal relatives. If we have these extended periods of learning, compared to other mammals, what are human babies doing in that time? What are the other animal babies doing in that time? How does this time shape the rest of our lives in comparison?

Why is Alison so passionate about her work? She works with children everyday. She observes, plays and sees first hand how important they are. Other fields of science, particularly the artificial intelligence community, is beginning to take notice of her work. They are starting to look at children and cognitive development to help advance their programming. Introducing play and adaptation to their systems is one thing scientists have taken away from observing children. The more you play around and experiment in your childhood, the more you are able to adapt and adjust to the unknown environments. How do you go about taking on new challenges? Exploring and having fun with things often helps to solve problems quicker.

What are some lessons we are learning about kids and technology? Will this generation’s technology ruin the world? Michael and Alison end the podcast discussing the ever changing technological advances and what impacts it may or may not have on the world and the children living on it.

In this episode of Trend Following Radio:

Life after death

Narrow attention

Exploring – as a child and adult

Unknown, unknowns

Bayesian babies

Test and adjust

Consciousness as a baby rather than adults

Children and technology

What’s it like being a baby? “Being in love in Paris for the first time after you have had three double espressos.” – Alison Gopnik

Martin “Marty” Bergin and James Dailey are on the podcast today. Bergin is the President and owner of DUNN Capital Management. He began working with DUNN in 1997 and took over the day-to-day operations of the firm in 2007. He became owner in 2015 (Bill Dunn remains Chairman). James Dailey became CEO of Dunn Capital in March 2016. DUNN has a track record that spans over 40 years.

Today’s podcast was recorded the week after the February 2018 volatility. Inevitably, when there is volatility in markets, machines are blamed. DUNN Capital is a trend following trading firm who uses computers for everything they do. They know fintech well. That said, there is a difference between DUNN Capital and “the machine” traders.

DUNN Capital trades from a higher volatility perspective and it has worked out well for them. They don’t charge management fees, but rather are completely incentive fee based. Further, at DUNN Capital they don’t reduce volatility for the sake of possibly reducing bad events–they still want strong profits and that is the only way they make money. Unfortunately, investors always remember drawdowns and they do try to minimize those without compromising their core system.

Finally, and this a surprise for many, DUNN Capital’s office is quiet and not very exciting. Trend following after all is about discipline and blocking out all of the media noise and information. DUNN’s investors get that. DUNN is managing money for the long term, not short term. Their trend following is geared toward data and everything in their research shows that long term trend following trading is their best opportunity.

In this episode of Trend Following Radio:

End of the new normal

Markets reverting

Long term volatility vs Short term volatility

Crypto currency

Risk management

Price action trading

Diversification in portfolio

“Inflation is a trend followers friend.” – Martin Bergin and James Dailey.

Mentions & Resources:

I’ll tell you about the mindset change that’s occurred since I started listening to your podcast and reading your book…

The biggest mindset change for me is to let my profits run instead of taking money off the table prematurely. My gains have been much bigger since that change. Not worrying about all the voices of CNBC and other amateur traders has also been beneficial. In addition, I’ve found myself studying stoic philosophy since your podcast with Ryan Holiday so that’s been beneficial as well and not just for my trading.

I plan on eventually buying your system once I get out of my parents place (I’m 21) and an expense like that makes sense. Until then, I gotta stick to the books and podcast. Thank you for making such useful content.

Oliver Hart is the 6th Nobel Prize winner to appear on Trend Following Radio. He is a British-born American economist, and currently the Andrew E. Furer Professor of Economics at Harvard University. He received the Nobel Memorial Prize in Economic Sciences in 2016 for his work on contract theory.

Oliver is an expert on contract theory, theory of the firm, corporate finance, law and economics. He studies how ownership roles, structure and contractual arrangements are used in the governance and boundaries of corporations. How did he get his start? After receiving his PhD from Princeton in 1974, he began studying general equilibrium under uncertainty – particularly the behavior of firms when under uncertainty. Summer of 1983 was when his career path shifted – specifically to contracts. He became less interested in what firms should do, and more interested in how firms align with what shareholders want them to do.

Following the 2008 financial crisis, Oliver believed it was dangerous to start intervening in such a fragile economy. Yes, it was an unprecedented crisis but, Oliver believes it was totally overblown. No physical or human assets were disappearing and we had mechanisms such as bankruptcy to fall back on. What was the reasoning behind some banks beings saved and others not? Wall Street was bailed out but mainstream was not? Oliver looked at the crisis as arbitrary and rigged. Michael and Oliver wrap the podcast up discussing the differences in block chain and bitcoin and end the podcast with a 6 minute bonus Q&A.

Testimonials

"The way I see it, you have two choices–you can do what I did and work for 30-plus years, cobbling together scraps of information, seeking to create a money-making strategy, or you can spend a few days reading Covel’s [Trend Following] and skip that three-decade learning curve."

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